Weekly Economic Update - Every Cloud has…

The economic news over the last few weeks hasn’t been bad, but it does indicate things are slowing down. This week’s news one both jobs and consumer prices shored up this view. But economists prefer to see this as some moderation. And when they say moderation, they usually mean that inflation is staying under control. The end result is less pressure on the Fed to raise rates repeatedly although they are still expected to do so next week. And mortgage rates? They are already at 3-month lows.

November’s Employment Situation Report from the Bureau of Labor Statistics (BLS) barely met expectations on many fronts. While the number of jobs created,155,000, was nothing to sneer at this late in the recovery and was certainly better than the 118,000 initially reported two months earlier, it was at the very bottom of what analysts had predicted (150,000 to 220,000). So were hourly earnings which came in with the same month-over-month and year-over-year gains as in October, 0.2% and 3.1% respectively.

A tiny upward adjustment to that dismal September jobs number and a larger downgrade to October rolled back the total for the two months from 368,000 to 356,000. Our favorite stat, construction jobs, were largely unchanged compared to October and have increased by only 4% or 282,000 over the last 12 months.

BLS also issued what used to be called the Consumer Price Index for November but now, like the names of many companies and most diseases, has been reduced to its initial caps.

The CPI report was termed by Econoday as “mixed-to-soft.” The primary index was unchanged from October as energy costs declined 2.2%, offsetting increases in apparel and transportation, up 0.9 and 0.8% respectively. Housing, the CPI’s main component, rose 0.3% and medical care, another major piece, increased 0.4%. With food and energy costs excluded, the core CPI, the measure preferred by the Federal Reserve, was up 0.2% for the month and matched the CPI’s 2.2% annual change.

...A Silver Lining

This subtle but undeniable slowing of economic growth is among the things that have worried the stock market and created its volatility, but there is a bright side to the recent numbers. Econoday said the employment report showed “sustainable non-inflationary strength” and noted that the core CPI rates were “consistent with the Fed’s 2% policy goal.”

Tim Rood, Chairman of the Collingwood Group, told Fox Business News that he was encouraged on interest rates. The FOMC holds its December meeting next week, and while they are still signaling a hike, Rood says it appears Chair Jerome Powell “is hitting the pause button,” in anticipation of changing business conditions in 2019.

Fed or no Fed, mortgage rates are already moving down. Freddie Mac’s 30-year fixed rate dropped 12 basis points this week and is down 31 since November 15.

The company said that rates have either fallen or remained flat for the last five weeks and purchase applications have ticked up in response. “While the housing market softened in response to higher rates through most of this year, the combination of a low unemployment and recent downdraft in rates should support home sales heading into the early winter months.”

As is our custom, we will be on hiatus for the next two weeks, to celebrate the Holidays with family. See you again in January.